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JPMorgan has upgraded fleet card provider WEX Inc (NYSE: WEX) to Neutral from Underweight as the brokerage believes the fuel price earnings risk is well understood and embedded in the Street estimates.
WEX reported first quarter non-GAAP EPS of $0.97 higher than JPM estimate of $0.88, Street view of $0.86 and company guidance of $0.80-$0.88. Total revenue rose 2 percent to $205.9 million, driven by higher fuel prices, increase in Fleet payment transactions, uptick in Travel & Corporate Solution volume growth, and improved credit trends.
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The company also provided an update on EFS deal, saying that FY16 accretion will still fall short of initial $0.15-$0.25 expectations. The company said fuel prices and financing spreads are better, but still worse than when the deal was announced last fall.
For the second quarter, WEX expects EPS of $0.96 - $1.04 on revenue in the range of $216 million to $226 million.
WEX increased its revenue and EPS outlook to account for higher fuel prices.
Assuming fuel price of $2.14 (up from $1.97), WEX raised 2016 EPS view to $4.07 - $4.37 from $3.80 - $4.10, which compares to Street estimates of $4.20. For the full year 2016, the company now expects revenue in the range of $879 million to $909 million (consensus is $892.11 million), up from prior outlook of $860 million to $890 million.
Analyst Tien-tsin Huang also increased the 2016 and 2017 EPS estimate, saying "We estimate a $0.10 change in average U.S. fuel prices is worth ~$0.16 to annual EPS."
As such, the analyst raised 2016 and 2017 EPS estimates to $4.22 (from $3.87) and $4.92 (from $4.65), respectively. Huang also raised price target on the stock to $91 from $72.
"Our price target applies a 18.5x target multiple, consistent with WEX's average NTM P/E over the past three years, which we think is reasonable in light of fuel price volatility and lower earnings visibility," Huang added.
Meanwhile, the analyst still prefers FleetCor Technologies, Inc. (NYSE: FLT) over WEX.
Hung noted WEX and FLT shares have appreciated 38 percent and 33 percent over the past three months and outperformed the benchmark S&P 500 index, which rose 11 percent in the same period.
In addition, shares of WEX and FLT trade at 22.7x and 23.6x JPMorgan's CY16E EPS, respectively. On an next-twelve month basis, Huang said WEX and FLT trade 22.1x and 22.4x Street estimates versus three-year averages of 18.4x and 22.6x, respectively.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.